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I spent the last month up to my neck in photocopied accounts and spreadsheets. I set out to find exactly which Irish companies were valuable, how much they were worth, and what made them valuable.
There’s an easy way to value a company – just multiply its earnings by the industry multiple. But that number is broad and it doesn’t tell you much interesting. So I valued them from the ground up, using a discounted cash flow (DCF) model, to see what makes them tick.
Last week we started to publish my findings. You can click here to read the first part of the list numbers 50 to 35, and here to read the second part, numbers 34 to 20. And I recommend you take the time to read this separate piece, which explains how I valued the companies, what the DCF valuation tells you and what it doesn’t.
18. Actavo: righting the ship
Actavo has had an eventful history. Originally known as Siteserv, it was bought by Denis O'Brien from the IBRC for €45 million in 2012.
It specialises in labour-intensive technical work. Its industrial division builds complex scaffolding, maintains equipment, installs insulation and cladding, cleans, paints and removes asbestos.
O'Brien rebranded Siteserv as Actavo and set about building the company up. Between 2012 and 2016 the company went into empire-building mode, expanding into the US, Kazakhstan, and the UK. Then CEO Sean Corkery said in 2015: "An initial public offering could be an enabler in terms of financing."
The wheels came off around 2015-2016. Actavo was heavily indebted, and the new business lines turned out to not be very profitable. Since 2016, the company has been undoing the damage from the go-go years.
In its most recent accounts, which are from 2019, Actavo reports a hefty operating loss. But it's in the process of backing out of its most unprofitable businesses. In its ongoing businesses, it made a €9.3 million operating profit. Projecting forward to 2021 gives an €11 million operating profit.
The DCF values Actavo at €189 million, but I'm suspicious of that number. It's amplified by the fact that Actavo's net capex in 2019 was minus €13.6 million. The DCF projects that forward into eternity and suggests Actavo can maintain its earnings while effectively liquidating its assets. Clearly, that's a temporary phenomenon, and unsustainable. If you assume in the long term that net capex goes to zero, Actavo is worth €106.8 million. In that scenario, an industry multiple values Actavo at €185 million.
17. Version 1: Cloud computing specialist
Version 1 helps big companies migrate their ITI systems onto the cloud. It builds software to help with the transition it provides services to help out after the move.
It's a technology partner of the two biggest cloud computing providers — Amazon Web Services and Microsoft Azure — as well as Oracle. Since 2011 it has won awards as Microsoft's partner of the year, and intelligence & data analytics partner of the year.
Version 1 is in expansion mode. Since its CEO Tom O'Connor took over in 2017, the company has spent €75 million on acquisitions. In 2017, there was even talk of a future IPO.
Version 1 was founded in 1996 by Justin Keatinge and John Mullen, and it employs 640. It is headquartered on the Millennium Walkway in North Dublin.
Version 1 made €5.6 million in operating profit in 2019 and I'm forecasting €7.5 million in 2021. That gives a DCF value of €189.4 million and an industry multiple value of €347 million. However, like Actavo, Version 1's value is flattered by a negative net capex spend in 2019. Assuming net capex goes to zero, the company's value drops from €189 million to €149 million.
16. Lakeland: Size through mergers
Lakeland is a dairy co-operative based in Cavan. It was formed in 1990 through the merger of two historic co-ops, Killeshandra (established in 1986) and Lough Eglish (established 1902).
Scale being the name of the game in the dairy processing business, Lakeland completed a big merger with Lacpatrick Dairy Co-op in 2019. It's one of the five big co-ops in Ireland along with Kerry, Glanbia, Carbery and Ornua.
Lakeland made €20.5 million in operating profit in 2019 and I'm forecasting €23 million in 2021. That values the business at €219.4 million, or €693 million using the industry multiple.
15. Arrow Group: diversified food processing
As any farmer will tell you, farming is a tough business. The farmer has very little control over how much money they make from year to year, and margins are slim. They take prices from the beef processors, who use their scale to dominate the industry.
The Queallys of Waterford are the rare farmers who managed to break out of their corner. They built a food processing business of their own and added value-added branded products to the mix too.
The Arrow Group is their business. It processes beef and pork, trades in meat, manufactures pet food, and manufactures branded food and drinks. Now Dawn Farms Foods, Arrow's food ingredients business, is Arrow's most important profit centre.
Arrow group made €27 million of operating profit in 2020, and would be expected to make €28 million this year. That translates to a DCF value of €219.5 million, or an industry multiple of €775.7 million.
14. Mannok: A great business, stuck in limbo
Mannok emerged from the wreckage of the Quinn empire, what used to be called Quinn Industrial Holdings. Its most important business is in cement and building materials.
It was bought out by three hedge funds in 2014: Silver Point, Brigade Capital and Contrarian Capital for €98 million. Since then, sales have risen 44 per cent, and staff numbers have risen 25 per cent.
Finance buyers usually look to sell within five years. They are not in the business of long-term ownership. But shortly after the hedge funds engaged banks to sell Mannok in 2019, Mannok executive Kevin Lunney was kidnapped and tortured by angry locals.
The business has been in limbo since. Though the trading business is performing strongly, it doesn't have the committed long-term owners it needs, since its hedge fund owners can't offload it. The torturers have inflicted real damage on the company and the region.
Mannok earned €12 million in operating profit in 2019. I'm forecasting that'll rise to €15 million in 2021. That values the business at €243.7 million using the DCF, or €348.5 million using in industry multiple.
13. Sisk: Size helps
Sisk is Ireland's biggest builder. It's been passed down through five generations of the Sisk family and is now controlled by the brothers JP, Owen and Richard Sisk.
The Sisks have employed a few strategies to keep the business going for 160 years. Construction is a highly discretionary industry (you can always do without building something new), so it's highly risky. The Sisks responded to this by dialling down the two other measures of risk as much as possible: operational and financial risk. They reduce operational risk by lowering their fixed costs as much as possible; they reduce financial risk by refusing to borrow money.
They reduce operational risk by subcontracting work to others. That allows them to neatly scale the business down when work dries up. It also allows them to manage cash flow by delaying payment to suppliers. It's a benefit that comes with being the biggest in the industry. The amount Sisk owes to suppliers went up by an average of €45 million in each of the two years between 2018 and 2020.
2020 was a bad year for Sisk, with Covid-19 and all. It made €23.7 million in operating profit. In 2021 I'd expect Sisk to get back on track and make €30 million. This translates to a DCF value of €245.9 million, or an Ebitda multiple of €324.5 million.
12. Ballyvesey: Ireland's biggest logistics company
Ballyvesey Holdings is headquartered in Newtownabbey, County Down. It's owned by the Montgomery Family.
Montgomery Transport was Ballyvesey's original business. It has since acquired transport and logistics companies East-West Transport and JE Coulter. It also owns truck franchises for DAF, Fiat, Mercedes and Scania, as well as dealerships for plant companies Atlas, Bobcat, Genie, Mecalec, Sany and Terex. In addition, it owns rental fleets in the UK. And in 2018 it acquired a UK fuel distribution business, Morrey Oils.
In its 2019 accounts, Ballyvesey was cooling down after a busy period of acquisitions and investment. As a result, its capex figure was quite a bit below its depreciation and amortisation. That boosted the company's value in the DCF.
On £5 million of forecast 2021 operating profit, the DCF valued Ballyvesey at €255.5 million. The Ebitda multiple valued it at €369.1 million.
11. St Vincent's Private Hospital Group: Biggest by venue
Measured by revenue, St Vincent's is Ireland's biggest private hospital group. It's owned by the Sisters of Charity and is based on the Merrion Road in South Dublin.
The group is typical of the hospital groups on the list — heavily indebted, with narrow margins on an accrual basis. But after accounting for reinvestment and non-cash, it looks healthier. It made €6.5 million operating profit in 2019 and I'm forecasting it'll make €7.5 in 2021. That gets to a DCF value of €264.4 million or an Ebitda multiple of €809 million.
10. Dairygold Co-op: Ireland's biggest
Dairygold is based in Mallow and serves the farmers of the fertile Golden Vale region. It is still 100 per cent farmer-owned, by 7,000 individual farmers.
As we've seen, dairy processing is a scale business. Margins are tight. But that doesn't mean there's not a great deal of money to be made.
I'm forecasting €30 million operating profit this year, which translates to a DCF value of €306.3 million. The industry multiple values it at €920 million.
Numbers: 9/6/4: Winthrop Engineering/Jones Engineering/Mercury Engineering: Ireland's exporting superstars
Each of these three companies — Winthrop Engineering, Jones Engineering and Mercury Engineering — are mechanical and electrical contractors.
Winthrop is controlled by founder Barry English and is headquartered in West Dublin and comes in at number nine on the list.
Jones Engineering is more than 60 per cent owned by Eric Kinsella, and is based in Ballsbridge. Kinsella is based in Switzerland and is known for his philanthropy. It ranks at number six.
Mercury Engineering was founded in 1972 by Frank O'Kane and Joe Morgan. Its current CEO Eoin Vaughan took over in 2014, and is now the largest shareholder. It ranks at number four.
Mech and elec contractors have always been an important part of any project. The mechanical and electrical components of a building are complex, and they have to be installed correctly first time. Any old construction company can't move into mechanical and electrical engineering. This meant mechanical and electrical engineers get to charge a premium for their services. And it shows up in the margins earned by the big three contractors, Winthrop Jones and Mercury.
Complex industrial buildings are the speciality of these engineering companies. The sums invested are huge, and the mech and elec component is critical. What started to dramatically change their fortunes was the data centre boom. A 2013 report by the US data analyst group 451 Advisors forecast Ireland was about to become a European capital of data storage based on its connectivity, political stability, renewable energy and mild climate.
Mech and elec contractors are the rare example of an indigenous Irish exporting success story. These contractors have built on their experience building high tech industrial units for FDI companies operating in Ireland (for example, Mercury helped build Intel's plant at Leixlip). Now they are exporting all over Europe. While Jones doesn't break out its revenue by geography, Mercury says it derived more than three-quarters of its revenue from continental Europe in 2019, and figures seen by The Currency show Winthrop made two-thirds of its revenue outside of Ireland.
A weakness of this valuation list is that it doesn't capture growth well. This is for two reasons. The first is that the model I'm using is a "mid-life" model, which doesn't assume a lot of growth. The second reason is that my sources are published accounts, which in many cases are two years old.
Going on 2019 published accounts doesn't give a good picture of what's happening with these engineering companies. However, my colleague Ian Kehoe came to my aid when he published a story about the detailed financial prospectus for Winthrop Engineering.
Winthrop made €23 million in operating profit in 2019. Based on the trajectory of recent earnings, and a vague sense that data centres are doing well, you might forecast 2021 earnings of €40 million. But Ian's reporting showed the company is expecting to make €58 million in free cash flow in 2021 (free cash flow is a close approximation of my measure, which is operating profit less tax less investment).
If I assume Winthrop's growth rate is representative of the other two major mech and elec contractors, their forecast operating profits jump to €100 million (Jones) and €110 million (Mercury). Based on those earnings, the three firms are valued as follows.
Winthrop Engineering is valued by the DCF at €429 million, and €599 million using an industry multiple.
Jones is valued by the DCF at €703 million, and €1.05 billion by the industry multiple.
And Mercury is valued by the DCF at €827 million, and €1.15 billion by the industry multiple.
8. Beauparc: Bootstrapped to €1 billion
From a standing start in Beauparc, Co Meath in 1990, Beauparc has bootstrapped its way to the point where it's big enough to be acquired by a major public company. Macquarie, The Australian investment giant, bought it earlier this summer for a price thought to be around €1 billion.
Beauparc was founded by Eamon Waters. Between 1990 and 2015 he grew the business to be Ireland's largest waste management company, under its Panda brand. In 2015 he started to move into renewables and in 2016 began to acquire rivals. Over two years Beauparc acquired Greenstar and Bioverda in Ireland, and WSR, Scotwaste, Newearth and AWM in the UK.
The private equity giant Blackstone bought a 37 per cent stake in the business in 2019. And now, with the Macquarie deal, Waters and Blackstone have their exit.
I'm forecasting €40 million of operating profit this year. That translates to a DCF value of €539 million and an industry multiple of €1.3 billion.
7. Musgrave Group: Distinctively Irish
The Musgrave Group was founded in Cork City in 1876, where it's still based.
It's a food wholesaler and retailer. It owns Supervalu, Centra, Mace (in Northern Ireland) and Daybreak.
Musgrave's model is unusual, for a grocer, in that it doesn't operate the stores itself. It owns the brands, runs the TV ads, and supplies them. But the shops are run by independent franchisees.
The cost of this is that it makes the products on the shelves a bit more expensive, since there's another layer which needs to make a profit. But the benefit of it is that the shop managers are close to the ground. They know their customers and adapt the stores accordingly. That's why Supervalu shops have that pleasant (to me) and distinctively Irish feel you don't get in Tesco.
Musgrave made €89.4 million in 2019, and I'm forecasting €91 million in 2021. That gets to a DCF value of €684.5 million or an Ebitda multiple of €1.38 billion.
5. Ornua: The power of a brand
Ornua is the name for Ireland's dairy board and strictly speaking, it's not an independent company. It's owned by Ireland's coops.
However Ornua has grown into a much more valuable entity than the dairy groups that own it.
Ornua's job is to market Ireland's dairy produce, which it does via the Kerrygold brand. And Ornua is good at its job. Kerrygold is the number one butter in Germany, number two in the US, and number three butter in the UK. In addition, Ornua sells Kerrygold-branded cheeses and spreads.
The US business in particular has exploded in recent years. Before the imposition of Trump's tariffs, Kerrygold had a record of ten consecutive years of double-digit sales growth in the US.
In 2020, operating profits grew 69 per cent to €83 million. I'm forecasting more of the same, but a bit less so: €110 million operating profits in 2021. That values the business at €780 million by DCF, or €2.01 billion by an industry multiple.
3. Mater Private: More profit per patient
What distinguishes Mater Private from the other hospitals on this list are its operating margins. With fewer patients, it makes much more money than St Vincents or the Bon Secours Group. This will have been spotted by the company that acquired it, the French infrastructure fund Infravia.
Like many of the other unusually valuable companies on the list, it also has negative net investment, due to low capex spending. Helpful for valuation purposes but probably not sustainable in the long run.
I'm forecasting the Mater Private will make as much next year as in 2019: €22.3 million. That values it at €964.2 million, or at a multiple based valuation of €1.19 billion.
2. Valeo: Greater than the sum of its parts
Valeo is a demonstration of the real-life power of financial engineering.
It was created out of whole cloth by Seamus Fitzpatrick's private equity house, CapVest, as a vehicle to bolt together Irish food brands like Batchelors beans and Roma spaghetti. Over 18 deals, Valeo acquired a stable of brands in Ireland, the UK and Europe.
The whole — Valeo — turned out to be worth far more than the sum of its parts. As a bigger business, it was able to negotiate better terms with supermarkets, and produce more efficiently. And when it reached a sufficient size, it came on the radar of the private equity giant Bain Capital. Bain Capital bought Valeo in May for €1.7 billion.
I was pleased to see Bain's valuation of the company tallied reasonably closely to that of my DCF model. Based on forecast 2021 operating profit of €105 million, the DCF values Valeo at €1.58 billion. An industry EV multiple values it at €2.39 billion.
1. Eir: By far Ireland's most profitable, and valuable, private business
Eircom, which now trades as eir, has had a few owners in its day: the state, the people of Ireland, Tony O'Reilly, public investors again, Babcock and Brown, Iliad SA, and now, the NJJ Telecom Fund. NJJ is a fund controlled by the French billionaire Xavier Niel. The deal valued Eircom at €3.5 billion.
My own DCF came up with a similar number. Eircom threw off €132 million of operating profit in 2021, and I'm forecasting based on the trajectory of the previous year that profits will grow to €142 million in 2021. Based on that, the DCF values Eircom at €3.4 billion, or €2.78 billion based on an industry multiple (one of the few examples of the multiple method valuing the company less highly than the discounted cash flow). That makes Eir, by some distance, Ireland's most valuable limited private company.
